Co-signing for a Credit Card

Identification

A co-signer is an individual who signs a loan agreement -- which can be for a vehicle, real estate or a revolving line of credit -- and agrees to take joint responsibility for the repayment of that loan. In the case of an auto loan, a co-signer assumes responsibility for the loan amount but does not take possession of the vehicle. Only the first signer does.

Considerations

Divide monthly debts by monthly income to determine debt-to-income ratio. A debtor seeking to obtain new lines of credit with a debt-to-income ratio of 15 or above may require a co-signer. Ideally, the co-signer will have a debt-to-income ratio of 15 or less and a good to excellent credit score, which is 700 or above. A co-signer increases the first signer's income potential and lowers his overall debt-to-income ratio.

Documents

Both signers must sign and date the credit application and provide financials. Lenders look for borrowers with a wide range of assets and a large amount of disposable income. Both parties must provide evidence of stocks, bonds and real estate, along with pay stubs, tax records and banking statements.

Warning

If the first signer fails to repay the loan, the co-signer is legally responsible for the debt. If neither signer satisfies the loan obligation, the lender can sue both parties for failure to honor the terms and conditions of the loan agreement. In addition to the legal damages of not repaying jointly-owned debt, both signers could suffer a drop in their consumer credit scores. Debt that remains unpaid may be considered "bad credit" and could lower a consumer credit score.